Business Insider
July 11, 2012
Associated Press (AP)
 (Photo by David McNew/Getty Images) |
As recently, as last month no city in
California had opted for bankruptcy
since 2008 and no U.S. city of more,
than 200,000 people had ever
chosen bankruptcy. The past two
weeks have changed all that in a big
way, as the fiscal struggles faced by
so many American cities became too
much for some to bear.
San Bernardino became the third
California city in that small span to
choose Chapter 9 bankruptcy
protection with a City Council vote
on Tuesday night. The Southern
California city of about 210,000
people will also become the second
largest in the nation ever to file for
bankruptcy.
Stockton, the Northern California city
of nearly 300,000, became the big-
gest, when it filed for Chapter 9 on June 28. The much smaller city of Mammoth Lakes
voted for bankruptcy July 3.
San Bernardino's City Council directed the city attorney to make the move during a meeting, where administrators explained the dire fiscal circumstances and urged them to choose the bankruptcy option. "We have an immediate cash flow issue," Interim City Manager Andrea Miller told Mayor Patrick Morris and the seven-member City Council according to the Los Angeles Times. Miller said, the city is facing a budget shortfall of $45.8 million. It has already stopped paying some vendors and may not be able to make payroll over the next three months.
Four council members voted for the authorization, two opposed it and one abstained. "This is probably the hardest decision, this councilwoman will ever have to make in this chair," Councilwoman Wendy McCammack said according to the San Bernardino Sun. The councilman, who abstained from voting, John Valdivia said, he did not trust the information presented at the meeting and having only served since March, believed, he should not be held responsible for the money mess. "The taxpayers of this city have been duped, hoodwinked and misguided for the past several years," Valdivia said according to the Sun. It was not immediately clear, when the city planned to file.
Sixty miles east of Los Angeles, San Bernardino is in a region, that soared economically during the housing boom and suffered accordingly after the crash. It joins a number of other cities and counties across the nation, that have plunged into financial crisis, as the recession made it tough to cover rising costs involving payroll, pensions, bondholders and vendors.
Before Stockton a California city had not filed for bankruptcy since Vallejo in 2008. Since Congress added Chapter 9 to the bankruptcy code in 1937 to allow municipalities to seek protection, about 640 government entities have filed.